Macro Exam 1
(Base year 2004) 2009 Meat - quantity: 100 - price: $10 - quantity: 120 - price: $12 Potatoes - quantity: 200 - price: $2 - quantity: 180 - price: $3 Refer to the above table. Assume the market basket for the consumer price index has two products — meat and potatoes — with the following values in 2004 and 2009 for price and quantity: The Consumer Price Index for 2009 equals
128.57 The 2004 Market Basket = [(100 * $10) + (200 * $2)] = $1,400. The 2009 Market Basket = [(100 * $12) + (200 * $3)] = $1,800. The Consumer Price Index for 2009 = ($1,800/$1,400) * 100 = 128.57.
Employment: 138,381 Unemployment: 15,340 Adult Population: 236,743 Based on the information above, the Civilian Labor Force is ______ and the Non-Labor Force is ________.
153,721 83,022
Suppose two countries have a per capita real GDP of $25,000 in 2017. Econoland has a growth rate of 4 percent and Macropolis has a growth rate of 5 percent. By 2020, the per capita real GDPs for Econoland is $_______ and for Macropolis is $________.
28,121.60 and 28,940.63
Suppose net domestic product is $4.8 billion, net income earned abroad is $0.7 billion, other business income adjustments net of indirect business taxes and transfers are $0.4 billion, and personal income taxes are $0.8 billion. Then, national income equals $______ billion.
4.4 National Income = $4.8 billion + $0.7 billion + $0.4 billion = $5.9 billion
If the nominal interest rate is 9 percent and the anticipated inflation rate is 4 percent, then the real interest rate is
5% The real interest rate = 9 percent minus 4 percent = 5 percent.
Employment: 138,381 Unemployment: 15,340 Adult Population: 236,743 Based on the information above, calculate the Labor Force Participation Rate.
64.93
Employment: 138,381 Unemployment: 15,340 Adult Population: 236,743 Based on the information above, calculate the Unemployment Rate.
9.98
An increase in consumer spending causes the_______ curve to shift to the___________
Aggregate Demand right
In order to protect your nominal income from inflation, you should always ask for a(n)
COLA
Which of the following factors affect the Aggregate Demand curve?
Consumption Government purchases Exports Imports Investment
What is the formula for a price index? The Current Year Price Index =
Current Year Price * Base Year Quantity
Which of the following is a key to economic development?
Developing an educated population. Allowing for creative destruction. Establishing a system of property rights.
Which of the following would be included when calculating Gross Domestic Product? A Social Security check for $800 The purchase of a used $10,000 automobile The purchase of a previously owned house for $70,000 None of the options are correct.
None of the options are correct.
Using the AD-LRAS model, an increase in capital accumulation cause the price level to _______ and potential real GDP to __________.
decrease increase
Many economists argue that real GDP is not a good measure of economic well-being because it
excludes the environmental quality of life.
The period between the business cycle trough and business cycle peak is called a(n)
expansion
A 0.5 percent change in the growth rate
has a significant effect on long-run real GDP over time.
The long-run aggregate supply will increase when
international trade barriers are removed.
The real output of the economy under conditions of full employment
is long-run aggregate supply.
To encourage economic development a country should do all of the following EXCEPT establish a system of property rights. invest in human capital. allow creative destruction to run its course. limit the amount of imports allowed into the country.
limit the amount of imports allowed into the country.
Which of the following is a benefit of long-run economic growth? An increase in
living standards leisure time
An increase in the price level causes a _______ the Aggregate Demand curve.
movement up along
According to the circular flow model, the total expenditure and total income
must equal each other
A worker who decides to quit their job and go to law school full time is considered to be
not in the labor force
Which of the following is an assumption of the Classical Model?
people are motivated by self-interest
In the absence of well-defined property rights, we would likely find
people with less incentives to take risks.
To prevent frictional unemployment, we would have to
prevent people from leaving their jobs before finding another job.
Which of the following is an important factor affecting positive economic growth? An increase in
productivity technology education
All of the following explain the downward slope of the aggregate demand curve EXCEPT
the presence of unused production capacity and unemployment.
The real rate of interest equals 8%, and the expected rate of inflation equals 2%. The nominal rate of interest is
10%
Which of the following factors affect the Long-Run Aggregate Supply curve?
Human Capital Technology Productivity Labor and Physical Capital Saving
An increase in long-run economic growth is illustrated by the _______ curve shifting _______.
Long-Run Aggregate Supply right
The determinants (factors) affecting the Long-run Aggregate Supply curve are
Saving Productivity Education Number of resources Technology
What is the formula for measuring the expenditure approach to measuring GDP (Y)?
Y = C + I + G + NX (exports - imports)
What could cause a decrease in the price level and simultaneously an increase in GDP similar to the 1920s in the United States? an increase in interest rates. an increase in productivity. a decrease in consumer confidence. a decrease in interest rates.
an increase in productivity.
Long-run economic growth is typically associated with a country's
standard of living
What is the formula for measuring the income approach to measuring GDP (Y)? Y =
wages + rent + interest + profit + depreciation + indirect business taxes
If consumer spending is $20,000, gross private domestic investment is $9,500, government purchases are $11,000, exports are $2,000, imports are $3,000, depreciation is $1,900, and indirect business taxes are $1,200, then Gross Domestic Product is
$39,500
The best measure of long-run economic growth adjusts
nominal GDP for inflation and population.
The Long-Run Aggregate Supply curve represents
potential real GDP
Suppose the economy has only three goods. Year: 2015 Price of Burgers: $4 Quantity of Burgers: 200 Price of Soda: $1 Quantity of Soda: 50 Price of Shoes: $50 Quantity of Shoes: 40 Year: 2018 Price of Burgers: $5 Quantity of Burgers: 200 Price of Soda: $1 Quantity of Soda: 60 Price of Shoes: $75 Quantity of Shoes: 50 Assume the base year is 2015. Based on the information above, the price index for 2015 is ______ and the price index for 2018 is ________
100 142.11
Year 2005 Nominal GDP 8950 billion Price Level Index 100 Year 2009 Nominal GDP 9250 billion Price Level Index 120 Using the data in the above table, if 2009 is the base year, then the real GDP for year 2005 is $ ______ billion Base Year Price Level Index 2005 = 100
10740.43 First, reset the Price Index values to 2009. So, the Price Index for 2005 = (100/120) * 100 = 83.33 Second, find real GDP for 2005 = ($8,950/83.33) * 100 = $10,740.43.
Year: 2014 Real GDP: 16220.222 Nominal GDP: 17735.933 Year: 2015 Real GDP: 16547.619 Nominal GDP: 18287.226 Year: 2016 Real GDP: 16851.420 Nominal GDP: 18729.130 Refer to the table above. Consider the following data on nominal GDP and real GDP (values are in billions of dollars). The GDP deflator (price level) for 2016 equals
111.4
After four years, if Country X's average annual growth rate is 8.6 percent and the initial real GDP was $2,756.0 million, then the real GDP will be $ ______ million
3833.5 Real GDP = $2,756.0 million * (1.086)4 = $3,833.5.
During the course of a year, the labor force consists of the same 1,450 people. Of these, 55 lack skills that employers desire and hence remain unemployed throughout the year. At the same time, every month during the year, 27 different people become unemployed, and 27 other different people who were unemployed find jobs. Also, 12 different people are unemployed due to seasonal factors. 15 people are unemployed due to the overall decline in the economy. Based on this information, The actual unemployment rate is__________ The natural rate of unemployment is__________
7.52% 6.48%
Using prices and quantities, what is the formula for real Gross Domestic Product (GDP)? Real GDP =
Base Year Price * Current Year Quantity
Indirect Business Taxes: $1,200 Corporate Profits: $1,500 Proprietors' Income: $640 Rental Receipts: $175 Net Interest Income: $650 Depreciation: $1,775 Wage and Salary Income: $8,200 According to the above table, net domestic product is
$12,365
If households receive $200 in net interest income, wages equal $9,500, rental receipts on land are $700, total business profits before taxes are $2,000, depreciation is $1,900, and indirect business taxes are $1,200, then Gross Domestic Product is
$15,500
If consumption expenditures are $100 million, net private domestic investment is $50 million, imports are $20 million, exports are $10 million, government spending on goods and services is $40 million, Social Security spending is $15 million, capital consumption allowance equals $25 million and sales of existing homes equals $40 million, then GDP equals $
$205 million Before we can find GDP, we need to find Gross Private Domestic Investment, which is Net Private Domestic Investment ($50 million) plus Capital Consumption Allowance (depreciation = $25 million). So, Gross Private Domestic Investment = $75 million. Consumption expenditures = 100 million Gross Private Domestic Investment = $75 million Government Purchases = $40 million Net Exports (exports - imports) = -$10 million ($20 - $10) So, GDP = $205 million.
If a country's real GDP is $20,000 billion and that country's population is 875 million, then real Gross Domestic Product per capita is
$22,857.14
All the following are assumptions of the classical model EXCEPT buyers and sellers react to nominal money prices rather than to relative prices. people are motivated by self-interest. pure competition exists. wages and prices are flexible.
buyers and sellers react to nominal money prices rather than to relative prices.
Long-run economic growth is represented by
potential real GDP
Refer to the table above. The inflation rates for 2006 to 2007 is _______ and 2007 to 2008 is _______ respectively
question 14 and 15 practice exam
Using the AD-LRAS model, an increase in capital accumulation and a decrease in business taxes causes the Long-Run Aggregate Supply curve to___________and the Aggregate Demand curve to___________ , respectively.
shift right shift right
Which of the following are one of the stages of economic development?
Services Agricultural Manufacturing
Which of the following is not included in GDP? An automobile dealer's inventory of cars declines over the last month. The government purchases new U.S. Postal Service trucks. You pay rent to your landlord. You win $20 in a poker game and don't report the income.
You win $20 in a poker game and don't report the income.
Using the AD-LRAS model, which of the following causes the price level to increase and real potential GDP to decrease? A(n)
decrease in the labor-force participation rate.
According to the text, data supports the conclusion that lower trade barriers
help boost per capita real Gross Domestic Product (GDP) growth.
Suppose Country A and Country B each have the same real Gross Domestic Product (GDP), equal to $440 billion. Country A has 100 million people and Country B has 175 million people. In this situation, per capita real Gross Domestic Product (GDP) is
higher in Country A.
The duration of unemployment tends to
increase when employment increases
Suppose the economy has only three goods. Year: 2015 Price of Burgers: $4 Quantity of Burgers: 100 Price of Soda: $2 Quantity of Soda: 170 Price of Shoes: $50 Quantity of Shoes: 40 Year: 2016 Price of Burgers: $5 Quantity of Burgers: 130 Price of Soda: $2.50 Quantity of Soda: 200 Price of Shoes: $75 Quantity of Shoes: 50 Year: 2017 Price of Burgers: $6 Quantity of Burgers: 160 Price of Soda: $3.50 Quantity of Soda: 250 Price of Shoes: $80 Quantity of Shoes: 60 Refer to the table above showing data for an economy that produces only the goods shown. If 2015 is the base year, Nominal GDP for 2016 is Refer to the table above showing data for an economy that produces only the goods shown. If 2015 is the base year, Real GDP for 2016 is Refer to the table above showing data for an economy that produces only the goods shown. If 2015 is the base year, then the growth rate in Real GDP between 2015 and 2016 is
$4900 $3420 24.82%
A country's growth rate is 4.0%. If the growth rate of capital accounts for 2.1%, the labor force growth rate accounts for 0.8%, and the growth rate of technology accounts for 0.5%, then the growth rate in productivity for this country is
0.6
During the course of a year, the labor force consists of the same 1,450 people. Of these, 55 lack skills that employers desire and hence remain unemployed throughout the year. At the same time, every month during the year, 27 different people become unemployed, and 27 other different people who were unemployed find jobs. Also, 12 different people are unemployed due to seasonal factors. 15 people are unemployed due to the overall decline in the economy. Based on this information, the cyclical unemployment rate is
1.03%
Which of the following is a key to economic development?
Allow foreign direct investment Establish a system of property rights Encourage saving and investment Develop a healthy and educated population
Which of the following will cause an increase in economic growth? A reduction in the stock of physical capital A reduction in labor force participation A reduction in the unemployment rate An increase in human capital
An increase in human capital
Which of the following causes a movement along the per-worker production function?
An increase in the amount of capital.
Which of the following people would be considered unemployed? Homer, who lost his job at the power plant and is not looking for work Edna, who lost her job as a teacher and is currently searching for a new job Lenny, who is working part time at a fast food restaurant Abe, who is retired
Edna, who lost her job as a teacher and is currently searching for a new job
In the early 1900s, Henry Ford revolutionized the automotive manufacturing industry by instituting the assembly line. What impact did the assembly line method for producing automobiles have on the per-worker production function for Ford?
It shifted up
Which of the following is a determinant (factor) affecting the Aggregate Demand curve?
Net exports Government purchases Consumer spending Business spending
Which of the following is a determinant of long-run economic growth?
Saving Productivity Education Number of resources Technology
Which one of the following is true? Saving enables economic growth by providing for investment in the capital stock. International comparisons have found no relationship between the rate of saving and the level of per capita real GDP. Economies with sophisticated credit markets, such as the United States, have no need for saving. Saving deters economic growth, because it takes money out of circulation and people spend less.
Saving enables economic growth by providing for investment in the capital stock.
Is it possible for the unemployment rate to rise at the same time that the number of people working increases?
Yes, if labor force growth outpaces growth in the number of people working
A welder loses his job when the factory is replaced with a hospital looking for specially trained nurses. This is an example of_________ unemployment.
structural
According to the Circular Flow Model, in every exchange the buyer pays ________ amount than the seller receives.
the same
Suppose education spending makes up 20 percent of the Consumer Price Index (CPI), and that the prices for education rise faster than the rest spending on all other items in the economy. On average an IU student spends 40 percent of her income on education. For the average IU student, the CPI
understates the inflation rate because of the importance of education for the average IU student.